Remittances as informal social insurance : a case study of Vietnam

Abstract

Like other developing countries, Vietnam's social security system is not universal as well as regressive and inefficient. It does not cover everyone, especially the poor and vulnerable. In response a large proportion of the population must rely on migration and migrant remittances. Do remittances play an informal social insurance role via poverty reduction, inequality reduction and unexpected shock effects relief? Are remittances crowed out by public transfers? This dissertation will answer these two questions. Chapter 1 explains why the questions are important. Chapter 2 overviews changes in Vietnamese socio-economy leading to large migration flows, explores the weakness of current social security arrangements and explains why remittances become important. This chapter also gives an analytical analysis of the role of remittances in poverty reduction and inequality reduction in comparison with public transfers. The role of remittances in the case of unexpected household negative shocks is tested in Chapter 3. This chapter solves two econometric problems (time-invariant unobservable variables and endogeneity) by applying the first-differencing method and the instrumental variable approach. Chapter 4 tests whether crowding out effects on remittances by public transfers can become a problem. A non-linear functional form is applied instead of linear functional form to test the relationship between remittances and recipient's pre-remittance income. Chapter 5 summarizes all the results from chapters 2, 3 and 4 and gives recommendations. -- provided by Candidate.